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According to the neoclassical consumption model, what would happen to consumption inequality? Why?
Why do economists use the terms investment and capital in very different contexts?
What is the user cost of capital? How is this user cost related to investment in physical capital?
When is the value of the stock market equal to the value of the capital stock? How is this related to Tobin's q?
What is a dividend return and a capital gain, and how do these terms enter the arbitrage equation when it is written in percentages?
In the simple theory developed in the chapter, why is the stock price equal to the dividend divided by interest rate (net of the capital gain)?
What determines the price-earnings ratio for a stock? What does this imply about detecting bubbles in the stock market?
What does it mean when economists say that the stock market is, at least to a great extent, informationally efficient?
How does the arbitrage equation help pin down the price of housing in our simple theory? What role does leverage play?
What is the user cost of capital? Explain the effect that taxes have on the extent to which monetary policy affects the user cost of capital.
What is the user cost if the corporate tax rate rises to 20 percent? 30 percent? What happens to this investment rate if corporate tax rate rises to 20 percent?
How does the arbitrage equation change in the presence of the investment tax credit? What is the user cost of capital in this case?
On the left side show the return from investing pi dollars in a saving account. On the right, show the return from using these funds to purchase the patent.
How large is the current budget balance? What about the current debt-GDP ratio? Is the current fiscal situation especially troublesome? Why or why not?
Explain the flow version of the government budget constraint. Explain the government's intertemporal budget constraint.
The government's budget constraint: What is the economic interpretation of the intertemporal budget constraint in equation (18.6)?
As a share of GDP, what was the balance for the primary budget in 1985, 1999, 2006, 2010, and in the most recent available year?
Write this budget constraint for each period. What must be true about B4? Using the result from part (b), solve the period 3 budget constraint for B3.
Why does the AS curve slope upward? What kind of economic changes in the economy would lead the curve to be more steeply sloped?
Write a brief memo to your CEO explaining one of the key points of the speech. Use the diagrams of the AS/AD framework if you like; your CEO is a former economi
In a one page essay, discuss the merits and demerits of this viewpoint, using graphs and equations when helpful.
What role do such frictions play in the financial crisis? How does a financial friction enter the IS/MP diagram and the AS/AD framework?
Why is the Great Recession best understood in the IS/MP-Phillips curve framework instead of the AS/AD framework?
What problems does deflation pose for the macroeconomy? How does deflation interact with the zero lower bound for nominal interest rates?
Throughout much of the financial crisis, the fed funds rate was substantially lower than what a Taylor rule for monetary policy would seem to indicate. Why?